I LOVE this question. You’re thinking about all the right stuff!
That was written a little while ago, but your current bank savings rate is low… like 0.1% low. I’d advise going with an online savings account. They have the same protections that regular banks do, just lower fees because they don’t have to spend on overhead (buildings/staff, etc.).
We use Ally
and they are continually raising interest rates (a positive in this case). Currently, we’re near 1.8%. I’ve seen friends use AMEX’s version and in researching, I see the Goldman Sach’s version as well. I know Ally, they’ve been around longer and they’re one of the pioneers in this realm.
There are many copycats that have jumped in here and I think Goldman may be new to the space (but I also could be uninformed). Ultimately, as long as they’re FDIC insured and they’re a brand name – you should be good. HOWEVER – Well’s Fargo used to be respected… Online banking is literally what Ally does – I’d go there or AMEX.
The savings account 401 level class
The money going into your online savings account should be your emergency fund level and below…
Basically, anything that you need to keep liquid and have relatively quick access to. Anything you’re intending to ‘invest’ doesn’t go here because although 1.8-2% is phenomenal for a savings account these days, it’s still not close to market average and probably right at or under the CPI (inflation metric).
$100/month is nothing to shake a stick at…
I don’t care if you’re adding $10/month, the interest will act exponentially over time. $100 is solid.
Here’s an illustration for the difference
If you invest $100/month for 5 years in Ally at 1.8% = $6,331
If you went with the traditional bank (0.1%) = $6,081
You would’ve contributed $6k in either case… The points:
Ally/Online Savings is better
This is not an investment but a better way to keep liquid cash
If you put that cash into the market and got 7%… $7,383
Here are the 30-year numbers (just for fun):
Ally = $48,035
Bank = $36,563
Market = $121,287
(You contribute $36k in each case…)
Other than this, I would dive heavily into the gambling while you’re still in the know… jkjk…
Scroll to the bottom to start there and go onward. 4 posts left to publish in this series but this should get you started.
Here’s another resource for some of the best finance books that I’ve come across – as some additional info to get you started.
I’m stoked for you to be taking these steps and thinking about these questions in life, Jake. So many of our peers haven’t even considered much of this stuff. AND – thanks for reaching out. It’s great to catch up.
Alright financial friends – a few questions: A) Do you like the mailbag posts? B) Where do you agree with me and where I’m I failing our friend, Jake? and C) What would you add that I left out? Let us know in the comments below!
Thanks for reading!
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I’m glad you’re here. Thanks again and talk soon!